Dow May Rise on Bank Earnings

LONDON -- Stock market futures are suggesting that the Dow Jones Industrial Average (INDEX: ^DJI) will rise by around 57 points when markets open this morning as investors look forward to some big earnings announcements today, with both JPMorgan Chase (NYS: JPM) and Wells Fargo (NYS: WFC) due to report before the markets open.

JPMorgan's earnings will be of particular interest, as they will provide the first clues as to the size of the losses suffered by the bank following its recent multibillion loss on a complex hedging trade. A raft of new economic data is also due for release this morning, starting with June's producer price index and Core PPI at 8.30 a.m. EDT and followed by July's University of Michigan consumer sentiment survey at 9:55 a.m. EDT.

Also of interest will be the latest news from Europe and China. There was some relief this morning when China's latest GDP figures came in as forecast, showing growth of 7.6% over the second quarter, compared with the same period last year. Although this is the lowest level of growth seen for three years, some analysts now believe it may mark the bottom of China's slowdown.

In Europe, the news was very mixed. Ratings agency Moody's downgraded Italy's credit rating by two notches overnight, taking it to "Baa2," which is only two levels above "junk" rating. Despite this, Italy managed to complete a bond auction successfully this morning and saw increased demand for its three-year bonds, which sold for an average yield of 4.65%, much lower than the 5.3% average yield seen in June's sale.

European markets were fairly flat in morning trading. The FTSE 100 (INDEX: ^FTSE) rose by 0.8%, mostly thanks to the news from China, which helped increase demand for shares in luxury retailer Burberry and most of the big mining companies, which depend on the Chinese economy for much of their growth. In Germany, the DAX was up by about 1.3%, but Deutsche Telekom was well ahead of the index, rising by 3.7% on news that Credit Suisse had raised its rating on the company's shares. Elsewhere, the CAC was up by 0.8%, while the FTSE MIB and IBEX were broadly unchanged.

Finally, although Warren Buffett is a JPMorgan shareholder, he won't be worried about the bank's short-term problems, as he prefers to focus on long-term earnings. This logic lay behind his recent $1 billion investment in a famous British FTSE 100 stock, which is currently out of favor but has global expansion potential and a superb dividend record. You can get the full details of the deal, including the identity of the company and the price paid by Buffett for his shares, in this special free report.